Canada government reluctant to tighten mortgage rules

Thu Mar 22, 2012 3:48pm EDT
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Randall Palmer

STITTSVILLE, Ontario (Reuters) - Canadian Finance Minister Jim Flaherty signaled on Thursday his reluctance to tighten mortgage rules and choke off the vital contribution the construction business makes to a still-recovering economy, but he said he would do so if necessary.

He said he preferred to let the market correct itself rather than have the government step in and impose new constraints on the industry, a move that some say is necessary to prevent a U.S.-style housing market crash.

Flaherty chided bank executives for suggesting the government impose more restrictions, noting the banks themselves, not the government, is in the business of offering mortgages.

"With respect to tightening up the mortgage insurance market - we've done it three times ... and we watch, we monitor the market, and if we have to tighten it some more, we will," he told reporters in the Ottawa suburb of Stittsville.

That said, he added: "The new housing market produces a lot of jobs in Canada, so there's a balance that needs to be addressed. I'd like the market to correct itself, quite frankly, if it can."

Canada escaped the severe housing downturn that triggered the recent recession in the United States, and the property market's buoyancy has helped underpin the Canadian economy since then.

One of the challenges facing policymakers is the unevenness of the broad Canadian real estate market, with sizzling conditions in Vancouver and Toronto, and relative coolness in other areas.

The price of existing detached bungalows in Vancouver on Canada's West Coast jumped 14.1 percent to C$1.02 million ($1.02 million) in the fourth quarter of 2011 from a year earlier. Yet new housing prices on average across Canada were only up 2.4 percent on the year.   Continued...

Canada's Finance Minister Jim Flaherty reacts as he receives a firefighter's helmet during a news conference at Fire Station 81 in Stittsville, Ontario March 22, 2012. REUTERS/Chris Wattie